3-month job toll: 1.25 million

Losses threaten to create a self-sustaining downward cycle

December 06, 2008|Maura Reynolds and Catherine Ho | Reynolds is a writer in our Washington bureau. Ho is a Times staff writer.

WASHINGTON — The nation lost a staggering 533,000 jobs in November for the worst monthly decline in 34 years, putting new pressure on federal lawmakers and President-elect Barack Obama to move aggressively to contain the widening economic crisis.

The unexpectedly high job losses, coupled with the threat of an auto industry collapse and escalating home foreclosures, point toward a much deeper recession than many economists had anticipated.

"With the loss of over a half-million jobs just last month, the U.S. job market is now shedding jobs at a truly alarming rate, a rate that is measurably worse than past recessions," said Jared Bernstein, a labor economist at the Economic Policy Institute who has been named an advisor to incoming Vice President Joe Biden.

"Policymakers need to recognize this as an emergency at the scale of any we've seen in recent years," he said.

Adding to the grim news, the Labor Department said Friday that job losses in the previous two months were much worse than originally estimated: 403,000 in September and 320,000 in October. That means that more than 1.25 million jobs vanished in just the last three months.

The darkening employment picture is making it harder for people like Jason Webber, 40, of Hollywood to find work.

Webber, a sculptor whose last job was as a sales associate at Kmart, said he had sent out 60 job applications and gone on 18 interviews just in the last three weeks, to no avail.

His girlfriend, Elizabeth Fields, 25, is expecting the couple's second child in 10 weeks, and Webber said he was increasingly anxious that he wouldn't have a steady income to support his family.

"It's just hellish," Webber said. "I don't know what I'm going to do. I'm running out of time. I'm probably not going to have a job when the baby's born, but that's just not an option."

Harry Holzer, a labor economist at Georgetown University, warned that a vicious cycle of job losses and foreclosures appeared to be picking up steam. A trade group reported Friday that a record 1 in 10 U.S. homeowners were either late on their mortgage payments or in foreclosure at the end of September.

"You're at that point in the business cycle where declines feed on themselves," Holzer said. "People who lose their jobs are going to have less money to make their housing payments, so that could increase foreclosures. They are also going to buy less, and declining consumer purchases are going to cause more job cuts."

"There's nothing to suggest that we're going to bottom out any time soon," he added.

Altogether, businesses have eliminated nearly 2 million jobs since the start of the year, according to the Labor Department. Normally the economy has to create 100,000 jobs a month, or about 1.2 million a year, just to keep pace with population growth.

The unemployment rate also rose -- though not as dramatically -- to 6.7% from 6.5%. Economists say that's because the government doesn't count "discouraged" workers, and many of those who have lost their jobs aren't even trying to find new ones. It also doesn't count people who are working part time because their hours have been cut or they can't find a full-time job.

When discouraged workers and involuntary part-timers are included, the effective unemployment rate rises to 12.5%, some economists estimate.

For most of this year, the losses have been concentrated in the manufacturing and construction sectors, but last month no part of the economy was spared.

That includes small businesses, which historically have been reluctant to part with trained workers because of the expense of finding replacements when business picks up again.

"The fact that you are now seeing job losses in small companies tells you that this has now spread well beyond the manufacturing and housing sectors," said Joel Prakken, chairman of Macroeconomic Advisers, an economic research firm in St. Louis.

Janine and Ted Montoya, who own two small air-conditioning and heating firms in Ventura County, say they've been forced to lay off seven employees, or nearly one-third of their workforce, in the last year.

One of the casualties was their own daughter, Bethany Montoya, who's getting married in two weeks.

"It's very, very hard," said Janine Montoya. "With large businesses, it's all on paper, it's all mathematics. With a small business, you're close to your employees. You know their wives and children. We have Christmas parties and barbecues together in the summer. It's so emotional."

Small businesses that aren't actually laying off people may be cutting back their hours. That's the situation at Lulu's Dessert Corp. in Anaheim.

Company founder Maria Sobrino said many of her 60 employees are now working four days a week instead of five, and shifts have been cut from 10 hours to eight. Unless business improves, she says, layoffs may come in January.